Kansas Mortgage Company Bond: A Comprehensive Guide
May 17, 2021
This guide provides information for insurance agents to help mortgage companies obtain Kansas Mortgage Company Bonds
At a Glance:
- Average Cost: Between 0.75% to 5% of the bond amount per year based on the applicant’s credit
- Bond Amount: Based on the yearly amount of mortgage loans originated and whether the company has a Kansas office:
| Bona Fide Office in Kansas | Less than $50 million in loans | More than $50 million in loans |
|---|---|---|
| Yes | $50,000 bond limit | $75,000 bond limit |
| No | $100,000 bond limit | $150,000 bond limit |
- Who Needs it: All mortgage companies operating in Kansas
- Purpose: To ensure the public will receive compensation for any damages should the mortgage company fail to comply with licensing law
- Who Regulates Mortgage Companies in Kansas: The Kansas Office of the State Bank Commissioner
Background
Kansas statute 9-2203 requires all mortgage companies operating in the state to obtain a license with the Office of the State Bank Commissioner. The Kansas legislature enacted the licensing laws and regulations to ensure that mortgage companies engage in ethical business practices. In order to provide financial security for the enforcement of the licensing law, mortgage companies must purchase and maintain a surety bond to be eligible for licensure.
What is the Purpose of the Kansas Mortgage Company Bond?
Kansas requires mortgage companies to purchase a surety bond as part of the application process to obtain a business license. The bond ensures that the public will receive compensation for financial harm if the mortgage company fails to comply with the licensing regulations set forth in the Kansas Consumer and Mortgage Lending Law Book. Specifically, the bond protects consumers in the event the mortgage company engages in any acts of fraud or fails to honor agreements made with consumers. In short, the bond is a type of insurance that protects the public if the mortgage company breaks licensing laws.
How Can an Insurance Agent Obtain a Kansas Mortgage Company Surety Bond?
BondExchange makes obtaining a Kansas Mortgage Company Bond easy. Simply login to your account and use our keyword search to find the “loan” bond in our database. Don’t have a login? Enroll now and let us help you satisfy your customers’ needs. Our friendly underwriting staff is available by phone (800) 438-1162, email or chat from 7:30 AM to 7:00 PM EST to assist you.
At BondExchange, our 40 years of experience, leading technology, and access to markets ensures that we have the knowledge and resources to provide your clients with fast and friendly service whether obtaining quotes or issuing bonds.
Is a Credit Check Required for the Kansas Mortgage Company Bond?
Surety companies will run a credit check on the owners of the mortgage company to determine eligibility and pricing for the Kansas Mortgage Company Bond. Owner’s with excellent credit and work experience can expect to receive the best rates. Owners with poor credit may be declined by some surety companies or pay higher rates. The credit check is a “soft hit”, meaning that the credit check will not affect the owner’s credit.
How Much Does the Kansas Mortgage Company Bond Cost?
The Kansas Mortgage Company surety bond can cost anywhere between 0.75% to 5% of the bond amount per year. Insurance companies determine the rate based on a number of factors including your customer’s credit score and experience. The chart below offers a quick reference for the approximate bond cost on a $50,000 bond requirement.
$50,000 Mortgage Company Bond Cost
| Credit Score | Bond Cost (1 year) |
|---|---|
| 700+ | $375 |
| 650 – 699 | $500 |
| 625 – 649 | $625 |
| 600 – 624 | $940 |
| 550 – 599 | $2,000 |
| 450 – 549 | $2,500 |
*The credit score ranges do not include other factors that may result in a change to the annual premium offered to your customers, including but not limited to, years of experience and underlying credit factors contained within the business owner’s credit report.
How Does Kansas Define “Mortgage Company?”
Kansas statute 9-2201 defines a mortgage company as any business entity that deals in mortgage loans, in any capacity, either directly or indirectly.
How do Mortgage Companies Apply for a License in Kansas?
Mortgage companies in Kansas must navigate several steps to secure their license. Below are the general guidelines, but applicants should refer to the NMLS’s application guidelines for details on the process.
License Period – The Kansas Mortgage Company License expires on December 31 of each year and must be renewed before the expiration date
Step 1 – Meet the Net Worth Requirements
Applicants for the Kansas Mortgage Company License who do not have a bona fide Kansas office must have a company net worth (assets – liabilities) of at least $50,000. Applicants must submit a financial statement, reviewed or audited by a CPA, verifying their net worth when submitting their license application.
Step 2 – Purchase a Surety Bond
Mortgage companies must purchase a surety bond based on the yearly amount of mortgage loans originated and whether the company has a Kansas office:
| Bona Fide Office in Kansas | Less than $50 million in loans | More than $50 million in loans |
|---|---|---|
| Yes | $50,000 bond limit | $75,000 bond limit |
| No | $100,000 bond limit | $150,000 bond limit |
Step 3 – Request a NMLS Account
The Kansas Mortgage Company License application is submitted electronically through the Nationwide Multistate Licensing System (NMLS). To submit a license application, applicants must first request to obtain an NMLS account.
Step 4 – Complete the Application
All Kansas Mortgage Company License applications can be completed online through the NMLS. Applicants must complete the entire application, and submit the following items:
-
- Reviewed or audited financial statements indicating a company net worth of at least $50,000 (applicants without a bona fide Kansas office only)
- Company business plan containing the following information:
- Marketing strategy
- Products
- Target markets
- Operating structure the applicant intends to employ
- Company formation documents
- Organizational chart detailing the company’s ownership structure
- Bona fide office attestation (only applicable if the company has a bona fide Kansas office)
- MU4 form for each loan originator (if applicable)
Mortgage companies must pay the following fees when submitting their license application:
-
- $750 licensing fee
- $36.25 background check fee (per person)
- $15 credit report fee (per person)
How Do Kansas Mortgage Companies Renew Their License?
Mortgage companies can renew their license online through the NMLS. License holders need to simply login to their account to access their renewal application. The Kansas Mortgage Company License expires on December 31 of each year and must be renewed before the expiration date.
What Are the Insurance Requirements for the Kansas Mortgage Company License?
The State of Kansas does not require mortgage companies to obtain any form of liability insurance as a prerequisite to obtaining a business license. Mortgage companies must purchase a surety bond based on the yearly amount of mortgage loans originated and whether the company has a Kansas office:
| Bona Fide Office in Kansas | Less than $50 million in loans | More than $50 million in loans |
|---|---|---|
| Yes | $50,000 bond limit | $75,000 bond limit |
| No | $100,000 bond limit | $150,000 bond limit |
How Do Kansas Mortgage Companies File Their Bond?
Mortgage companies should submit the completed bond form, including the power of attorney, electronically through the NMLS. The surety bond requires signatures from both the surety company that issues the bond and a representative from the mortgage company. The surety company should include the following information on the bond form:
- Legal name and NMLS number of entity/individual(s) buying the bond
- Surety company’s name
- Bond amount
- Date the bond is signed
What Can Kansas Mortgage Companies Do to Avoid Claims Against Their Bond?
To avoid claims on their bond, mortgage companies in Kansas must follow all license regulations in the state, including some of the most important issues below that tend to cause claims:
- Do not engage in any acts of fraud
- Honor all agreements made with consumers
- Pay all required taxes and fees
What Other Insurance Products Can Agents Offer Mortgage Companies in Kansas?
Kansas does not require mortgage companies to purchase any form of liability insurance as a prerequisite to obtaining a license. However, most reputable businesses will seek to obtain this insurance anyway. Bonds are our only business at BondExchange, so we do not issue liability insurance, but our agents often utilize brokers for this specific line of business. A list of brokers in this space can be found here.
How Can Insurance Agents Prospect for Kansas Mortgage Company Customers?
The NMLS conveniently provides a public database to search for active mortgage companies in Kansas. The database can be accessed here. Contact BondExchange for additional marketing resources. Agents can also leverage our print-mail relationships for discounted mailing services.
